Fannie Mae Selling Guide A2-2-03 — Document Warranties

Fannie Mae Selling Guide A2-2-03 — Document Warranties

A2-2-03, Document Warranties (10/06/2021) Introduction This topic contains information on document warranties, including: Legal Document Warranties Nonstandard Documents Legal Document Warranties Document warranties relate to legal documents used for a mortgage, such as security instruments, notes, and assignments. Nonstandard Documents When a lender sells Fannie Mae mortgage loans that are closed on legal documents other than the current Fannie Mae/Freddie Mac uniform instruments, or current Fannie Mae instruments that are applicable to the transaction, the lender warrants that the mortgage loans otherwise comply with the Lender Contract. The use of nonstandard instruments will not preclude it or any subsequent servicer from performing all servicing and accounting functions required by Fannie Mae’s Guides. By delivering loans not closed on current Fannie Mae instruments, the lender represents and warrants as follows: Applicable laws and regulations, enforceability, negotiability — No term of the instruments violates applicable laws and regulations, each and every term of the instruments is fully enforceable under applicable laws and regulations, and the mortgage note constitutes a negotiable instrument under the Uniform Commercial Code (UCC) of the applicable jurisdiction(s). Definition of security property — The definition of security property conforms to the definition used in the Fannie Mae/Freddie Mac uniform instruments, and must include all improvements erected on the property (at the time the document is executed and in the future), easements, appurtenances, fixtures that are part of the property (at the time the document is executed and in the future), and replacements and additions to such improvements, appurtenances, and fixtures. Personal property/principal residence — A one-unit property that is the borrower’s principal residence may not include personal property or other items (such as appliances, furniture, or equipment) that might be considered as additional security. Mortgage loans secured by a two- to four-unit principal residence or an investment property — If personal property is pledged, it may be to the same extent as it is pledged by the 1-4 Family Rider (Form 3170). Due on Sale — The instruments for fixed-rate conventional mortgage loans include a fully enforceable due-on-sale or due-on-transfer clause, except as limited by federal law. “Default” rate of interest — The instruments do not include a “default” rate of interest provision. Rights similar to those in Fannie Mae/Freddie Mac Uniform Instrument — The instruments do not Published May 6, 2026 19 grant more favorable rights to the borrower on default and foreclosure, or less favorable rights to the note holder with respect to property insurance (including both required insurance and insurance the borrower elects to obtain), leasehold interests, other liens on the property, condemnation proceedings, or other proceedings that result in a full or partial taking of the property, or any other compensation, settlement, or award of damages that is the result of damage to, or destruction of, the property than those granted in the Fannie Mae/Freddie Mac uniform instruments for the applicable jurisdiction(s). Waivers of Rights of Redemption — The instruments include a specific waiver by the borrower, and, if applicable, the borrower’s spouse, of: any legally waivable statutory right of redemption after foreclosure, Note: Statutory rights of redemption that are not waivable under applicable law are acceptable only to the extent the instruments do not grant more favorable rights to the borrower on default and foreclosure than those granted in the Fannie Mae/Freddie Mac uniform instruments for the applicable jurisdiction. any right of homestead, dower, or similar marital right, and rights of presentment and notice of dishonor, if a waiver of rights is necessary to protect the note holder’s interest. Right to advance — The instruments expressly allow the note holder to advance at any time sums for unpaid insurance premiums, property taxes, or any other payments necessary to protect the value of the property or the note holder’s rights in the property and permit the note holder to collect such amounts from the borrower on a deferred basis. Note holder actions to protect the property — The instruments permit the note holder to undertake certain actions to protect the property, including securing and repairing the property if it has been abandoned, and to add the costs of these actions to the amount of the debt. Actions note holder is not obligated to take — The instruments do not obligate the note holder to advance additional principal sums, forgive or suspend fully or partially scheduled installments or any portion of them for the borrower’s benefit, or apply any prior principal prepayment to reduce or cure the borrower’s delinquency. Fixed interest rate and level principal and interest payments — The instruments provide for fixed interest rates and level principal and interest payments, unless the mortgage loan is an adjustable-rate mortgage. Replacement Index and Replacement Margin — The instruments for ARM loans include the Alternative Reference Rates Committee (ARRC) recommended fallback contract language for new closed- end, residential ARMs. (See, for example, the Multistate Adjustable-Rate Note 30-Day Average SOFR (Form 3441), paragraph 4.G. Replacement Index and Replacement Margin.) Maturity date — The instruments specify a maturity date. If the instruments do not specify a maturity date, the lender warrants that: the mortgage loan will be fully amortized during a specified original term with no subsequent adjustments to the amount payable; the entire indebtedness, including any amount previously added to the mortgage loan balance and the principal and interest payments, will be secured by the mortgage loan and take priority over Published May 6, 2026 20 intervening liens; the lien of the mortgage loan is a valid first lien; and the priority of the mortgage lien at the time of delivery will not be diminished over the term of the mortgage loan and, during that time, all sums, including any sums previously added to the mortgage loan balance, will be repaid in monthly installments. Notice of grievance — The instruments require the lender and the borrower to give the other party a notice of any grievance arising under the security instrument and to allow the notified party a reasonable period after receipt of the notification to cure the grievance before the party providing the notice commences, joins, or is joined to a judicial action, as either an individual litigant or as a member of a litigant class that seeks redress or recovery in connection with the grievance. Maintenance of property — The instruments obligate the borrower to maintain the property in a way that prevents deterioration and to repair promptly any damage to the property, whether or not such damage is covered by insurance. Mortgage Insurance — The instruments provide that the lender, any purchaser of the mortgage note, a mortgage insurer other than the insurer of the mortgage, any reinsurer, or any other entity (including an affiliate of any of the foregoing) may receive (directly or indirectly) amounts that derive from (or might be characterized as) a portion of the borrower’s payments for the mortgage insurance in exchange for sharing or modifying the mortgage insurer’s risk or otherwise reducing losses. Borrower’s failure to take a future action — The instrument (or any other agreement that the borrower signed) does not provide that the borrower’s failure to take a future action requested by the lender (such as providing and paying for additional documentation for the transaction after the date of loan closing) constitutes a default. Alternatively, if the instrument does include such a provision, the lender will not enforce it. Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Announcements Issue Date Announcement SEL-2021-09 October 06, 2021 Announcement SEL-2019-01 February 06, 2019 A2-2-04, Limited Waiver and Enforcement Relief of Representations Published May 6, 2026 21 and Warranties (04/01/2026) Introduction This topic contains information on the following: Limited Waiver of Representations and Warranties for Loan Casefiles Submitted to DU Enforcement Relief of Representations and Warranties for Undisclosed Non-Mortgage Debt Enforcement Relief of Representations and Warranties for Loans with Data Calculated by Approved Vendor Tools Enforcement Relief of Representations and Warranties for Loans with Data Validated by the DU Validation Service Enforcement Relief of Representations and Warranties for Loans with Income Calculated by Income Calculator Representations and Warranties on Property Value for Loan Casefiles Submitted to DU Limited Waiver of Representations and Warranties for Loan Casefiles Submitted to DU Fannie Mae grants a limited waiver of certain underwriting representations and warranties to a lender that sells an eligible mortgage that is underwritten with DU. If DU returns an Approve/Eligible recommendation on the final submission of the loan casefile to DU, then Fannie Mae will not require the lender to represent and warrant that the mortgage loan complies with the requirements of this Guide with regard to the mortgage loan’s eligibility for delivery to Fannie Mae and the borrower’s creditworthiness, provided that: All data pertaining to the mortgage loan is complete, accurate, and not fraudulent, and all data on which the underwriting recommendation was based reflects the final terms of the closed mortgage loan, and otherwise comply with the requirements relating to submissions and resubmissions as stated in this Guide and any relevant supplemental materials. All data on which DU’s recommendation is based complies with Fannie Mae’s verification requirements and the mortgage loan file is documented accordingly. The lender uses the appropriate special feature codes, as specified in the delivery reporting requirements of this Guide or elsewhere in the Lender Contract. SFC 127 is required for all loans underwritten through DU. All Verification Messages/Approval Conditions that appear in the DU Underwriting Findings report with respect to the related mortgage loan application must be satisfactorily resolved, and the mortgage loan file documented accordingly. All other requirements, instructions, and restrictions set forth in this Guide and any release notes are complied with by the lender (or DU licensee). The lender reports the proper DU-assigned unique loan casefile ID at the time of delivery on the appropriate loan schedule or schedule of mortgages. (A DU loan casefile ID is unique to an individual mortgage loan. The same casefile ID may not be used to underwrite more than one mortgage loan to DU.) The lender pays all applicable loan-level price adjustments. Published May 6, 2026 22 The foregoing waiver of underwriting representations and warranties does not apply to: loans that receive an Out of Scope recommendation, even if the underwriter believes that the mortgage should be approved; loans that receive an Approve/Ineligible or Refer with Caution recommendation; and the product eligibility representations and warranties in Ability to Repay Loan Eligibility Requirements (see B2-1.5-02, Loan Eligibility); the eligibility and underwriting representations and warranties that apply to the property, including, but not limited to, condition, value, or marketability of the property; appraisal or alternative property inspection as set forth in this Guide; government loans that are underwritten with DU; and seasoned loans, as defined in this Guide. Note: All seasoned loans that are delivered to Fannie Mae, including those that received an Approve/Eligible recommendation from DU, must meet Fannie Mae’s seasoned mortgage requirements as set forth in B2-1.5-02, Loan Eligibility. All other representations and warranties that are part of the Lender Contract shall apply. The use of DU does not relieve the lender of any obligation set forth in the Lender Contract, except as expressly set forth: in this section with respect to Fannie Mae’s limited waiver of representations and warranties; and in any DU recommendation or findings relating to documentation requirements, property valuation requirements, and any other similar requirements provided by DU, unless such requirements are modified by B3-2, Desktop Underwriter (DU), of this Guide or the lender’s applicable DU license agreements. Enforcement Relief of Representations and Warranties for Undisclosed Non- Mortgage Debt When a DU loan casefile receives an Approve/Eligible recommendation and a message indicating the loan has obtained representation and warranty relief for non-mortgage undisclosed liabilities on the final DU submission, Fannie Mae will not enforce representations and warranties related to such debt obtained by the borrower(s) prior to or concurrent with the day of closing. The following details apply: All Verification Messages and Approval Conditions that appear in the DU Underwriting Findings report must be satisfactorily resolved and documented accordingly. All data on which DU's recommendation is based complies with Fannie Mae's verification requirements and the mortgage loan file is documented accordingly. If the lender becomes aware of, or the borrower discloses, changes in the terms of the loan or verified information (such as income, assets, or liabilities) prior to closing that exceeds the resubmission tolerances specified in B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report, the data must be updated, and the loan casefile resubmitted to DU. If there is information that is conflicting with or contradictory to the data that was submitted to DU, the lender must perform due diligence to investigate and ensure that accurate data is entered into DU. DU's offering of representation and warranty relief does not relieve the lender of any of its obligations within the Selling Guide related to the identification and inclusion of a borrower's liabilities in the DTI and Published May 6, 2026 23 for consideration in underwriting, including those that may be identified throughout the origination and prefunding QC processes. Undisclosed mortgage-related debt (including HELOCs and second liens) are excluded from eligibility for relief. The loan must close by the credit report expiration date. Enforcement Relief of Representations and Warranties for Loans with Data Calculated by Approved Vendor Tools The table below details enforcement relief for mortgages with data calculated by approved vendor tools. Data Calculated by a Fannie Mae-Approved Vendor Tool Fannie Mae will not enforce representations and warranties on Details Income the accuracy of the calculation of the amount of self-employment income by the tool. The following requirements apply: • the information submitted to the tool must be accurate and complete, • the lender must not perform any manual overrides of the output results of the tool, • the amount of self- employment income entered in DU must match the amount of income calculated by the tool, and • the loan must be delivered with SFC 777. In all cases, the lender must continue to comply with all DU messages, including documentation and determination that age of documentation requirements are met, and determine the eligibility of the self- employment income being used to qualify. See B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower for information on using other approved vendors. Enforcement Relief of Representations and Warranties for Loans with Data Validated by the DU Validation Service In addition to the limited waiver of representations and warranties described above, Approve/Eligible loans for which DU validated a loan component may also benefit from certain representation and warranty enforcement relief. The table below describes the validated component, the related enforcement relief, and other details. Published May 6, 2026 24 Component Validated by DU Fannie Mae will not enforce representations and warranties on Details Income • the accuracy of the lender’s income calculations related to the validated income, and • the integrity of the data provided on the verification report. The DU message must indicate that the amount of income entered into DU was validated and that the verification report is acceptable documentation. For loans with income validated using an employment and income verification report, this applies on a per-borrower, per- income source, per-income type basis. For loans with income validated using an asset verification report, this applies on a per- borrower, per-income source basis. Employment • the borrower’s employment, through the time of closing, with the employer attested to on the loan application, and • the integrity of the data provided on the verification report. The DU message must indicate that the employment entered into DU was validated. Applies on a per-borrower, per- employer basis. Assets • the sufficiency of the borrower’s assets to satisfy Total Funds to be Verified as required by DU or a greater amount if stated in the DU message, and • the integrity of the data provided on the verification report. The DU message must indicate that assets were validated. Applies on a loan-level basis. The lender must comply with the following additional requirements in order for the representation and warranty enforcement relief to apply: Published May 6, 2026 25 All of the requirements that pertain to the DU validation service must be met. All Verification Messages and Approval Conditions that appear in the DU Underwriting Findings report, including any related to the DU validation service, must be satisfactorily resolved and documented accordingly. The loan must close by the "Close by Date" stated in the DU message. If there is information that is conflicting with or contradictory to the data that was submitted to DU, the lender must perform due diligence to investigate and ensure that accurate data is entered into DU. Enforcement relief will not apply, regardless of DU’s issuance of validation messages, if the lender’s investigation of conflicting or contradictory information contained in the loan file or within the verification report would have impacted the information entered by the lender in DU. For more information on the DU validation service, see B3-2-02, DU Validation Service. Enforcement Relief of Representations and Warranties for Loans with Income Calculated by Income Calculator Income Calculator is an optional tool to assist lenders in calculating certain income types. Income Calculator performs a complete analysis of a borrower's qualifying income (for eligible income types) and produces a Findings Report. If lenders comply with the following requirements, they will receive representation and warranty enforcement relief for the accuracy of the income calculation, on an income-source basis, on loans with income calculated by Income Calculator. All information submitted to Income Calculator must be accurate and complete. A copy of the Findings Report must be kept in the loan file. The amount of income used for qualifying cannot be more than the amount calculated by the tool. Lenders must continue to comply with all other Selling Guide requirements, including DU messages, as applicable. See B3-3.1-03, Income Calculator for additional requirements and technology servicer provider information. Representations and Warranties on Property Value for Loan Casefiles Submitted to DU In addition to the limited waiver and enforcement relief of representations and warranties described above, loans may also benefit from waivers or enforcement relief of certain representations and warranties related to the appraisal and value of the subject property. See A2-2-06, Representations and Warranties on Property Value, for more information. Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Published May 6, 2026 26 Announcements Issue Date Announcement SEL-2026-03 April 01, 2026 Announcement SEL-2025-09 November 05, 2025 Announcement SEL-2024-05 August 07, 2024 Announcement SEL-2024-02 March 06, 2024 Announcement SEL-2023-11 December 13, 2023

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